By  on May 25, 2006

NEW YORK — When Scott Kuhlman opened one of his namesake stores at 30 Rockefeller Plaza here last year, he didn't have the advertising budget of neighbors such as J. Crew, Banana Republic and Façonnable.

Instead of buying ads or renting bus shelter panels, he used a guerrilla marketing technique to raise awareness for the store and its Anglo-Italian-style careerwear. Kuhlman had a box of 200 men's and women's shirts hand-delivered to the offices of a nearby investment bank.

"It's great for getting people introduced to the brand," said the founder and chairman of Kuhlman Co., Minneapolis. "Stores near an office drop location report incremental sales of over 75 percent. It's retail 101. It's getting people into the stores. Once they're in the store, we can do our job."

In just four years, the company has opened 53 stores in 19 states and the District of Columbia. With rapid growth, there have been inevitable growing pains. In December, Kuhlman realized he needed help running the company. He called Luis Padilla, former chief merchant at Sears and executive vice president of Target's former Marshall Field's division. "‘I need to replace myself as ceo,'" Kuhlman recalled telling him.

Padilla, who had left Sears after 14 months, liked Kuhlman's concept: European-style suits and separates sold in a boutique setting.

"I was looking for something small, where I could add some value and help it grow," Padilla said. "They did a good job of analyzing the niche in the marketplace. For years, department stores have been trying to do a neoclassical private label brand at an attainable price point, but they haven't been able to. The only people doing it well are the classic Italian designer brands, and they're too expensive for most people."

Kuhlman's prices range from $55 for a shirt with French cuffs to $345 for a trenchcoat. A jacket with pick-stitch detail is $295, matching pants are $125. The company, which did $16 million in sales in 2005, expects to double its volume for 2006.

In addition to apparel for men and women, Kuhlman sells shoes, handbags, belts and scarves. Scott Kuhlman called home products a natural extension of the brand and said they will be featured on the company's relaunched Web site in June. "Eventually, we will license fragrance and eyewear," he said. "We don't want to give up control over anything yet. We enjoy being in control of our sourcing. We're control freaks about product."While fashion has been mainly on target, Kuhlman has struggled with the size and location of stores. The company initially opened small units in malls, but soon realized they couldn't accommodate the growing product range. Kuhlman now looks for street locations of 1,000 to 3,000 square feet.

Existing stores are being expanded and, so far, the size of nine units has been increased.

"The original plan was a very simple Thomas Pink idea with lower rent and lower payroll," Padilla said. "It quickly blossomed to a full men's and women's lifestyle offering. You can't do that in 900 square feet, and malls aren't ideal."

The plan is to grow Kuhlman along the lines of Urban Outfitters, which operates 93 stores in the U.S., Europe and Canada. Urban Outfitters has carefully chosen its locations and resisted the temptation to overstore.

"The growth beyond that will have to be a different brand idea," Padilla said. "Chico's is growing with Soma. The idea of having 1,200 stores is over. It's more about having 200 stores."

The company has already started to think beyond Kuhlman. "Even though we're working hard to get this going and trying to fix the things that happen in start-ups, we're still looking at what to do after we get to 200 stores," Padilla said.

A brand called SK2 — the initials stand for Scott and his wife, Susan — is in development. SK2's raw-edged garments made from slightly washed-out fabrics are the ying to Kuhlman's dressed-up yang. "We thought we would open individual stores," he said. "We are still designing and using the SK2 logo, but we're really concentrating on the Kuhlman brand."

The 2 Lazy K label is focused on denim. "Two Lazy K is the name of my family's range in Nebraska," Kuhlman said. "The logo is branded on the cattle. We haven't done a lot with this, but it's something we may develop."

Kuhlman said he plans to open next year in Boston, Philadelphia, Los Angeles, Chicago, Washington, D.C., San Francisco and New York, where he ultimately envisions 15 to 20 units. A 700-square-foot airport unit recently opened at Logan International Airport in Boston and could be replicated at about a dozen airports.Kuhlman, who worked at Joseph Abboud, Hartmarx and SFI Apparel before starting his business, was convinced he could fill a niche with a wholesale line of European-style shirts at reasonable prices. He began peddling the collection in 2002, but retailers didn't immediately respond to the product.

Kuhlman rented a shop across the street from Marshall Field's Minneapolis flagship and filled it with 1,000 woven men's shirts. "I opened the first store with no intention of expanding," he said.

Padilla's involvement has been a validation of Kuhlman, which went public through a reverse merger last June. A PIPE (private investment in public equity) acted as the offering, and U.S. Bank and Bear Stearns became investors through another PIPE in February. The company is listed on the American Stock Exchange under the symbol KUL.

"We'll go to the big capital companies at the end of this year," Padilla said. "We'll have a couple of quarters of performance where we actually do what we said we were going to do. We have a very good story."

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